Institutional investors keep cryptocurrency in Binance wallets in expectation of rapid market growth

David Kemp

Storing of the cryptocurrencies on exchange wallets has serious risks. Despite this, institutional investors act in such a way. This was the conclusion of a study by Binance Research after conducting an appropriate survey.

Binance Research Results

According to the results of the survey, the company concluded: “Exchange wallets are the most popular method of storing assets in cryptocurrency among institutional clients. This method is chosen by more than 92% of them".

Another preferred method for cryptocurrencies storing by institutional clients is cold wallets. Almost 33% of users use them. Only 2.6% of respondents use custodian services.

Experts said that 92% of respondents do not independently control their own assets, they entrusted this to third parties. More than half of users use this storage method for amounts of up to 10 bitcoins. 

If we talk about strategies for investment, institutional people use the following:

  • Market making - 19.7%
  • Technical analysis - 25%
  • High-frequency trading - 35.5%

The most preferred stablecoin in this category is USDT. It accounts for 40%. Such popularity is explained by high liquidity and high capitalization. USD Coin (19%) takes the second position, followed by PAX and TUSD, the share of each of them is at 13%.

The companies participating in the survey called regulation in the field of cryptographic currencies a likely factor in the development of the industry, as well as a significant risk. First of all, respondents noted a coin from Facebook (Libra) and a digital yuan.

Institutional investors believe that a well-developed market for digital currencies will depend on derivative financial instruments built on the basis of crypto assets and their application by classic broker organizations.

Talking about bitcoin, 69% of respondents said that by the end of this year, bitcoin will significantly dominate at the market. They made it clear that they were afraid of altcoins.

The respondents were 76 customers who use Binance crypto-exchanges. In the article “Binance Exchange Overview” you can read about the features of this trading platform.

Binance Research Announces Benefits of Long-Term Storage Strategy

Bitcoin holding (storing of the cryptocurrency in the long run) is a successful investment strategy, according to Binance experts. They believe that the maximum increase in the value of cryptocurrency No. 1 occurred within a few days. Its pass was very painful. Researchers stated: “In case of doubt, choose a long-term strategy for holding a coin. If you did not have bitcoin in early December 2017, then you would not be able to win at the maximum daily gain, which amounted to 25%. The value of the coin in just 1 day increased by more than $3,600”.

Binance Research experts have shown the effect of better days on daily income for holding per day in annual terms. For example, in late spring 2013, bitcoin was trading at $100 per coin, so far the average growth is 220 percent.

If you exclude 10 days with a maximum increase in the BTC rate, the yield falls to 70%, the lost profit is estimated at more than 150%. If you subtract the 50 best days from the increase in the value of the cryptocurrency, the average profit will be only 1%.

One of Binance's clients wrote about the minus holding: “Refusing to sell bitcoin on January 6 last year for a market participant would mean missing the most powerful collapse during the month, which amounted to 65%. After this month, multiple drawdowns began. As a result, the cost of bitcoin has fallen by 85%. Holding is a good meme, but it cannot be called a rational strategy to preserve value”.

Ways to Store Cryptographic Currency

The whole variety of storage methods can be divided into 2 large classes:

  • Hot. Coins on it are available in real time. The user can use them at any time. Hot wallets need access to the Web; to use them, an active connection to the blockchain is required.
  • Cold. Used for offline storage without an internet connection. To use it, you can use a phone, a personal computer, a flash card and even a paper sheet. Hardware wallets are considered the safest.

Wallets can be divided into regular and multi-currency. The second option allows you to store different coins in one place.

The correct choice of a wallet is extremely important for the preservation of cryptographic currencies. Cold wallets are considered the most reliable. When using them, access to digital money is cut off.

Disadvantages of Storing Significant Amounts on Cryptocurrency Exchanges

A number of crypto enthusiasts store altcoins on crypto exchanges. This approach is convenient, because modern trading services allow you to work with dozens of cryptocurrencies. But it has a number of weaknesses, as the user trusts his money to another organization.

Many cryptographic exchanges are centralized, they are subject to hacking and from time to time they experience DDoS attacks. All this threatens the safety of funds and allows you to temporarily lose access to wallets due to interruptions in the service and technical work. Users who do not trade significant assets on exchanges are better off with a different storage method in the long run.

Many institutional investors store cryptocurrencies in the wallets of the Binance exchange. This is not the best solution if you do not plan to sell coins in the nearest future. On the other hand, for short-term or medium-term trading, you can use Binance wallets. The exchange has proven its reliability and solvency. That is why many traders prefer it.